Stocks fall amid strong 2-month gain

By Josh P. Hamilton
Bloomberg News Service

A child sits quietly amid a flurry of activity on the floor of the New York Stock Exchange yesterday, the traditional "Kids' Day" for traders. Stocks fell, but the Dow showed a weekly gain for the eighth straight week. Associated Press

Yet the Dow Jones industrial average rose for the eighth straight week, and had its biggest two-month percentage advance since 1987. The string of weekly gains is the longest in more than 4 1/2 years.

"The market has accomplished all it can," said James Awad, chairman of Awad Asset Management in New York. "It should stay where it is until we get a better fix on the fourth quarter and first quarter. If we go much higher now, it will be at the expense of next year."

The Dow declined 35.59, or 0.4 percent, to 8,896.09 in a half-day session after the Thanksgiving holiday. Standard & Poor's 500 Index fell 0.3 percent, to 936.31.Nasdaq's composite index slid 0.6 percent to 1,478.80.

The Dow has risen 5.9 percent in November and is up 17.2 percent since the end of September, the greatest two-month gain since January-February 1987. The S&P 500 added 5.7 percent in November, and the Nasdaq gained 11.2 percent.

Economic reports this week showed increases in employment, manufacturing and consumer confidence.

"The next couple of years, we will see improving economic activity," said Robert Morris, chief of equity investments at Lord, Abbett & Co., speaking to Bloomberg Television. "We're going to see profitability coming back."

The rally has pared losses in U.S. stocks, which are headed for the third straight year of decline. The S&P 500 has shed 39 percent from its peak in March 2000.

UAL Corp., owner of United Airlines, slumped 84 cents to $2.79. United's 13,000 mechanics and cleaning workers rejected proposed pay and benefit cuts yesterday that the world's No. 2 airline has said are needed to help it win federal aid and avoid a bankruptcy filing.

Standard & Poor's downgraded UAL's credit rating to CCC- from CCC, moving it closer to default.

Boeing fell 97 cents to $34.05. UAL is the biggest client of Boeing's finance unit. United Technologies, whose Pratt & Whitney unit is the world's third-largest jet-engine maker, dropped 82 cents to $63.01. The two accounted for about half the Dow's drop.

Retailers such as Wal-Mart and Target Corp. fell on expectations that consumers will spend less than forecast during the holiday season. Merchants are offering discounts to lure shoppers, who have been slowing their spending amid concerns about layoffs and stock market declines.

Wal-Mart, the largest retailer, dropped 68 cents to $54.16. Target slid 52 cents to $34.78. Kohl's Corp., a department store chain, fell $1.35 to $68.50.

Best Buy Co. rose 65 cents to $27.68 and Circuit City Stores Inc. gained 38 cents to $9.68. Goldman Sachs analyst Matthew Fassler said promotions by the retailers "appear comparable" to this time last year, suggesting they will not topple profits.

The packaging company Sealed Air Corp. surged $13.33 to $37.81 as the maker of Bubble Wrap settled asbestos litigation stemming from a unit it purchased from W.R. Grace & Co. in 1998. Fresenius Medical Care AG, a provider of dialysis services that also bought a W.R. Grace unit, neared agreement to settle asbestos claims in the United States for $15 million.

Other companies facing asbestos litigation also rose. Haliburton Co. climbed $1.81 to $21 and Georgia-Pacific Corp. surged $3.16 to $20.73.

The Russell 2000 Index of smaller stocks fell 3.88, or 1 percent, to 406.36.

Advancing and declining stocks were about even on the New York Stock Exchange, where trading totaled 637 million shares, 55 percent more than the abbreviated post-Thanksgiving session a year ago.